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Markel Group (MKL) Up 2.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Markel Group (MKL). Shares have added about 2.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Markel Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Markel Q1 Earnings, Revenues Miss Estimates, Rise Y/Y

Markel Group reported first-quarter 2024 net operating earnings per share of $18.17, which missed the Zacks Consensus Estimate by 1.8%.  The bottom line, however, increased 4.7% year over year.

Markel witnessed improved earned premiums and increased net investment income.

Quarterly Operational Update  

Total operating revenues of $3.6 billion missed the Zacks Consensus Estimate by 1.5%. The top line rose 9% year over year.

Earned premiums increased 8.1% to $2.1 billion in the reported quarter.

Net investment income increased 37% year over year to $218 million in the fourth quarter.

Total operating expenses increased 8.3% to $3.1 billion, owing to underwriting, acquisition and insurance expenses, product expenses, and services and other expenses.

MKL’s combined ratio deteriorated 120 basis points (bps) year over year to 95.2 in the reported quarter.

Segment Update

Insurance: Gross premiums increased 5% year over year to $2.2 billion. The uptick was driven by new business growth and more favorable rates within personal lines and program product lines, as well as increases in most classes of international portfolio.

Underwriting profit came in at $107.3 million, up 11% year over year. The combined ratio improved 10 bps year over year to 94.3.  

Reinsurance: Gross premiums remained flat year over year at $553.3 billion. Higher gross premiums within marine and energy, general liability and credit and surety product lines were offset by a significant decline in gross premiums within professional liability product lines.

Underwriting profit was $12 million, down 50% year over year. The combined ratio deteriorated 470 bps year over year to 95.3 in the first quarter of 2024.

Markel Ventures: Operating revenues of $1.1 billion improved 3% year over year. The growth was driven by moderately higher revenues at consumer and building products businesses, construction services businesses and transportation-related businesses due to a combination of increased demand and higher prices.

Operating income of $103.9 million increased 13% year over year, driven by the impact of higher operating margins at consumer and building products businesses as a result of declines in the cost of materials, freight and labor, as well as higher revenues.

Financial Update

Markel exited the first quarter of 2024 with cash and cash equivalents of $4.3 billion, down 1.3% from the 2023 end level.  

The debt balance increased 2% year over year to $3.9 billion as of Mar 31, 2024 from 2023 end level.

Shareholders' equity was $15.8 billion at first quarter 2024 end increased 5% from 2023 end.

Net cash provided by operating activities was $630.8 billion in the first quarter, more than double year over year, reflecting higher net premium collections.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 5.37% due to these changes.

VGM Scores

Currently, Markel Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Markel Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Markel Group is part of the Zacks Diversified Operations industry. Over the past month, Carlisle (CSL), a stock from the same industry, has gained 5.6%. The company reported its results for the quarter ended March 2024 more than a month ago.

Carlisle reported revenues of $1.1 billion in the last reported quarter, representing a year-over-year change of -7%. EPS of $3.72 for the same period compares with $2.57 a year ago.

For the current quarter, Carlisle is expected to post earnings of $5.71 per share, indicating a change of +10.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Carlisle. Also, the stock has a VGM Score of C.

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